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Question : The adjustment required for overvaluation of closing stock, while calculating adjusted profit for calculate goodwill is

(A) reduction from concerned year's profit.

(B) reduction from next year's profit.

(C) addition to next year's profit.

(D) addition to previous year's profit

Choose the correct answer from the options given below:

 

Option 1: (A), (B) and (D) only

Option 2: (A) and (C) only

Option 3: (A) and (D) only

Option 4: (B), (C) and (D) only.


Team Careers360 1st Jan, 2024
Answer (1)
Team Careers360 13th Jan, 2024

Correct Answer: (A) and (C) only


Solution : When closing stock is overvalued (increase in credit side) in Trading A/c, current year's gross profit will be increased. In order to eliminate this effect, overvaluation of closing stock will be reduced from current year's profit. Overvaluation of closing stock while calculating adjusted profit will be reduced from the concerned year's profit and added to the next year's profit.

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